New Delhi: The Board of Directors of state-owned Power Finance Corporation Limited (PFC) and REC Limited (REC) have approved a definitive Scheme of Merger. Under the approved structure, REC will serve as the transferor company and will be absorbed into PFC as the transferee company. The consolidation is set to establish a massive public-sector infrastructure financing giant with a combined aggregate loan book exceeding INR 11 lakh crore.
The execution of the merger is governed under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. Completion of the transaction remains conditional upon obtaining all requisite approvals and consents from the respective shareholders and creditors of both companies. It is also subject to clearances from relevant regulatory and governmental authorities. Furthermore, the effectiveness of the scheme relies on the merged entity continuing to qualify as a Government Company under the Companies Act, ensuring that the Government of India retains majority voting rights and direct or indirect control.
Based on the finalized valuation reports, the boards have established a Share Exchange Ratio for the transaction. Shareholders of REC will receive 88 fully paid-up equity shares of PFC, featuring a face value of INR 10 each, for every 100 fully paid-up equity shares of REC of INR 10 each. The allotment will apply to REC shareholders holding equity as of a future record date, which will be determined by the boards of both corporations.
A comprehensive group of institutional advisors has been appointed to guide the restructuring process. Deloitte Touche Tohmatsu India LLP is managing the transaction and tax advisory portfolio, while Cyril Amarchand Mangaldas is operating as the legal advisor to both PFC and REC. On the valuation front, RBSA Valuation Advisors LLP was appointed by PFC and Ernst and Young Merchant Banking Services LLP was selected by REC to provide joint valuation reports. To ensure financial diligence, SBI Capital Markets provided a fairness opinion on the joint valuation report to PFC, while Nuvama Wealth Management delivered a corresponding fairness opinion to REC.